I am advised by Revenue that under what is termed as “new basis” business, all life assurance policy holders are taxed on a gross roll-up basis. This means that the life assurance company is not subject to tax on its policy holder profits, but rather the policy holder is subject to exit tax on the happening of a chargeable event. A chargeable event will occur:
- on the maturity of the life policy;
- on the surrender in whole or in part of the rights conferred by the life policy;
- on the assignment in whole or in part of the life policy;
- on the ending of an eight year period beginning with the inception of the life policy and each subsequent eight year period beginning when the previous one ends.
This gross roll-up regime was first introduced in Finance Act 2000 to allow investment in such life policies to grow without the imposition of tax. The 8 year deemed disposal ensures that exit tax cannot be deferred indefinitely by the continual rolling over of a life assurance policy without it becoming chargeable to tax.
On maturity, full surrender or assignment of the life assurance policy following an eight year event, the tax paid on the deemed disposal is available for offset in the calculation of the final tax liability.